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EX-10.1 - EX-10.1 - Federal Home Loan Bank of Dallas | d84859exv10w1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 22, 2011
FEDERAL HOME LOAN BANK OF DALLAS
(Exact name of registrant as specified in its charter)
Federally chartered corporation | 000-51405 | 71-6013989 | ||
(State or other jurisdiction of | (Commission File | (IRS Employer | ||
incorporation or organization) | Number) | Identification No.) |
8500 Freeport Parkway South, Suite 600 | 75063-2547 | |
Irving, TX | ||
(Address of principal executive offices) | (Zip Code) |
Registrants telephone number, including area code:
(214) 441-8500
(214) 441-8500
Former name or former address, if changed since last report:
Not Applicable
Not Applicable
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions:
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain
Officers; Compensatory Arrangements of Certain Officers
On December 20, 2010, the Board of Directors (Board) of the Federal Home Loan Bank of Dallas
(Bank), acting upon a recommendation from its Compensation and Human Resources Committee
(Committee), approved the Banks 2011 Long Term Incentive Plan (2011 LTIP), subject to the
review of the Federal Housing Finance Agency (FHFA). On July 21, 2011, the FHFA provided
comments to the Committee regarding the 2011 LTIP. In response to those comments, the Board,
acting upon a recommendation from the Committee, approved certain modifications to the 2011 LTIP on
August 5, 2011. On September 22, 2011, the FHFA informed the Bank that it did not object to the
revised 2011 LTIP. The 2011 LTIP is retroactively effective as of January 1, 2011.
The 2011 LTIP provides cash-based award opportunities based on the achievement of performance goals
for the period from January 1, 2011 through December 31, 2013 (the 2011-2013 Performance Period)
to employees of the Bank who have been designated by the Board to be participants in the plan. For
the 2011 LTIP, the Board has designated as participants, among others, Terry Smith, Michael Sims,
Nancy Parker, Paul Joiner and Tom Lewis, who are the Banks named executive officers identified in
the Banks Annual Report on Form 10-K for the year ended December 31, 2010, which was filed with
the Securities and Exchange Commission on March 25, 2011.
The performance goals under the 2011 LTIP were established by the Board and are based upon factors
relating to the Banks retained earnings, market value of equity, internal controls, FHFA
examination findings, and the overall performance of the Bank in achieving its annual short-term
objectives during the 2011-2013 Performance Period. Each performance goal under the LTIP is
assigned a specific percentage weight together with a threshold, target and maximum
achievement level. For each performance goal, the percentage achievement can be 0 percent (if the
threshold goal is not met), 60 percent (if results are equal to the threshold goal), 80 percent (if
results are equal to the target goal) or 100 percent (if results are equal to or greater than the
maximum goal). Achievement levels between threshold and target and between target and maximum will
be interpolated in a consistent manner as determined by the Committee. The results for each
performance goal are multiplied by the assigned percentage weight to determine their contribution
to the overall 2011 LTIP goal achievement. Generally, awards will become vested under the 2011
LTIP if the performance goals have been satisfied and the participant is actively employed by the
Bank on December 31, 2013. Awards under the 2011 LTIP are payable no later than March 15, 2014.
The aggregate maximum awards that can be earned by a participant in 2013 under the Banks
short-term incentive compensation plan known as the Variable Pay Program (VPP) and the 2011 LTIP
will be substantially the same as the maximum award that could have been earned under the VPP in
2013 in the absence of the 2011 LTIP (that is, 60 percent of base salary for the Banks President
and Chief Executive Officer and 43.75 percent of base salary for the other named executive
officers), with certain exceptions as described below. In order to effect this outcome, the
results of the 2013 VPP goal achievement and the 2011 LTIP goal achievement will each be weighted
50 percent to determine the total incentive award payout for 2013 (to be paid in early 2014). For
purposes of the 2011 LTIP, the calculations are based upon the participants average base salaries
during the 2011-2013 Performance Period and their maximum potential award percentages. The
calculations for the VPP are based upon the base salaries in effect at the beginning of each
calendar year and the participants maximum potential award percentages.
The 2011 LTIP provides for discretionary awards and other adjustments as well as additional
incentive payments if certain thresholds are met, any or all of which could increase a
participants total maximum incentive award payout (including both short and long-term incentives)
to an amount that is greater than the maximum award that currently can be earned under the VPP. If
the overall 2011 LTIP goal achievement is equal to or greater than 90 percent, each participant
will be entitled to receive an additional incentive payment in an amount equal to 15 percent of his
or her average base salary during the 2011-2013 Performance Period. If the overall 2011 LTIP goal
achievement is equal to or greater than 80 percent but less than 90 percent, each participant will
be entitled to receive an additional incentive payment in an amount equal to 10 percent of his or
her average base salary during the 2011-2013 Performance Period. In addition, the Board has
delegated to the President and Chief Executive Officer the authority to grant an additional
discretionary award under the 2011 LTIP to a participant to address external market considerations.
The aggregate pool of funds available for discretionary awards cannot exceed 10 percent of the
total long-term incentive awards. Further, the final 2011 LTIP awards may be modified up or down
at the Boards discretion to account for performance that is not captured in the performance goals.
The amount of the award that is ultimately payable to a participant under the 2011 LTIP is based
upon the level at which the performance goals have been achieved, plus or minus any discretionary
awards or adjustments. In addition to the level at which the 2011 LTIP performance goals have been
achieved, the Board will base its decision on the following qualifiers when deciding whether to
approve payouts under the 2011 LTIP: (i) the consistent ability to pay quarterly dividends to
members throughout the 2011-2013 Performance Period; (ii) the consistent ability to repurchase
excess capital stock throughout the 2011-2013 Performance Period; and (iii) the maintenance of the
Banks triple-A credit rating from Moodys Investors Service (Moodys) and Standard & Poors
(S&P).
On August 8, 2011, S&P lowered its long-term counterparty credit rating on the Bank from AAA to AA+
with a negative outlook. This action was taken after S&P lowered its long-term sovereign credit
rating on the U.S. from AAA to AA+ with a negative outlook. In the application of S&Ps Government
Related Entities criteria, the Banks rating is constrained by the long-term sovereign credit
rating of the U.S. On August 2, 2011, Moodys confirmed its Aaa deposit rating on the Bank and, at
that time, assigned a negative outlook to the rating.
When assessing performance results and determining final 2011 LTIP awards, the Board may also
consider those events that, in its opinion and discretion, are outside the significant influence of
the participant or the Bank and are likely to have a significant unanticipated effect, whether
positive or negative, on the Banks operating and/or financial results. Further, the Board may
adjust the performance goals to ensure that the purpose of the 2011 LTIP is served.
If during the 2011-2013 Performance Period a participants employment with the Bank is terminated
due to death, disability, retirement (provided certain conditions are met) or special circumstances
as approved by the Board, then his or her 2011 LTIP award will, to the extent the performance goals
for the 2011-2013 Performance Period are satisfied, be treated as earned and vested in a pro rata
manner based upon the relative portion of the 2011-2013 Performance Period prior to that
participants termination of employment. If a participants employment is terminated for any other
reason during the 2011-2013 Performance Period, his or her unvested 2011 LTIP awards will be
forfeited. If during the 2011-2013 Performance Period the Bank is involved in a significant
transaction, such as a merger, consolidation, reorganization or sale of all or substantially all of
its assets, or is liquidated or dissolved, then any unvested 2011 LTIP awards will be treated as
earned and vested in a pro rata manner based upon the relative portion of the 2011-2013 Performance
Period prior to such transaction or event.
The 2011 LTIP includes provisions that require forfeiture of awards in specified circumstances,
including a determination by the FHFA that there is an unsafe or unsound practice or condition
within a participants area(s) of responsibility and such unsafe or unsound practice or condition
is not subsequently resolved in favor of the Bank, and also subjects awards to cancellation if they
are determined to be based on fraud or material financial misstatements. Further, the Board will
utilize its discretion to reduce the amount of the 2011 LTIP awards for one or more of the Banks
named executive officers if during the 2011-2013 Performance Period it determines that: (i)
operational errors or omissions result in material revisions to the Banks financial results, the
information submitted to the FHFA or the data used to determine incentive award amounts; (ii) the
submission of information to the Securities and Exchange Commission, the Federal Home Loan Banks
Office of Finance, and/or the FHFA has not been provided in a timely manner; or (iii) the Bank
fails to make sufficient progress, as determined and communicated to the Bank by the FHFA, in the
timely remediation of examination, monitoring, and other supervisory findings/matters requiring
executive managements attention.
The Board may amend or terminate the 2011 LTIP at any time in its sole discretion. Absent an
amendment to the contrary, 2011 LTIP benefits that have vested prior to a termination of the 2011
LTIP will be paid at the times and in the manner provided for by the 2011 LTIP at the time of the
termination.
The form of the 2011 Long Term Incentive Plan, including the Form of Award Agreement, is filed as
Exhibit 10.1 to this Form 8-K.
Item 9.01 Financial Statements and Exhibits
Exhibits | ||
10.1
|
Form of 2011 Long Term Incentive Plan including the Form of Award Agreement, as approved by the Banks Board of Directors on December 20, 2010 and as revised and re-approved by the Banks Board of Directors on August 5, 2011 |
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Federal Home Loan Bank of Dallas |
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Date: September 28, 2011 | By: | /s/ Tom Lewis | ||
Tom Lewis | ||||
Senior Vice President and Chief Accounting Officer | ||||